Retail

In the retail industry, whether physical stores, multi-channel, online, or marketplace platforms, the key to staying competitive lies in offering a personalized customer experience, differentiating from direct competitors, and creating a unique shopping journey.

 

Boosting Profitability: Key Approaches for the Retail Industry

Streamline Indirect Spend

 

Business areas like Logistics, IT, and Marketing typically handle indirect spend independently from procurement, which can result in increased requirements and higher costs. Involving procurement in these areas helps ensure better cost management and maintains consistency with essential activities, such as shopfitting, while staying aligned with the brand's identity.

 

Unlock the Full Potential of Private Labels

 

Private labels contribute to higher margins and stronger customer loyalty, but achieving success requires attention to both cost management and product quality. Strengthening partnerships with suppliers, using sophisticated cost analysis, and sourcing from the most cost-effective countries are essential for increasing profitability. Furthermore, value engineering and optimizing product specifications help maintain competitiveness while upholding quality standards.

 

Strengthen Brand Negotiations

 

 

Successful brand negotiations are key to securing favorable terms, enhancing value, and fostering long-term relationships. Through comprehensive category analysis, assessing supplier performance, and aligning negotiations with broader business objectives, retailers can unlock significant advantages.

 

 

KGM Strategy Value Finder

KGM Strategy has developed a powerful tool that transforms how businesses approach data analytics, providing actionable solutions for working capital optimization, freight analysis, and spend analytics. Designed with modular flexibility, it adapts effortlessly to your unique needs and challenges, ensuring maximum relevance and impact.

Our pre-designed templates deliver insights in just days, empowering you to analyze data by category, supplier, product, or key KPIs. With over a decade of expertise and 80+ successful projects, we’ve honed best practices that solve typical retail pain points and uncover hidden opportunities.

Read more here

 

 

 

Retail Under Pressure: The Challenges Ahead

1. Threat of New Market Entrants Disrupting Competition

Agile players are reshaping the retail landscape with rapid production cycles, competitive pricing, and data-driven strategies. Their success intensifies pressure on traditional retailers to differentiate, accelerate time-to-market, and enhance customer experiences. Swift adaptation and investments in digital transformation are critical to maintaining competitiveness.

2. Rising Costs Putting Pressure on Retail Margins

Rising prices for raw materials, labor, and energy are placing significant strain on retail margins. Retailers must balance maintaining affordable pricing for consumers with ensuring profitability. Strategic levers such as value engineering, cost breakdown analysis, and strong supplier negotiations can unlock savings while maintaining quality and competitiveness.

3. Evolving Consumer Preferences Driving Complexity

Shifting consumer preferences, coupled with heightened expectations for sustainability, personalization, and speed, are adding complexity for retailers. Consumers demand tailored products, rapid trend responses, and faster delivery options like “next-day” shipping. Retailers must adapt quickly in assortment planning, sourcing, and fulfillment while optimizing delivery channels to stay competitive.

How we help retailers thrive 

Indirect spend, including categories like IT, Marketing and shop design, is often managed without centralized procurement control, leading to outsized needs and consequently inflated costs and inefficiencies. We address this by centralizing purchasing processes and giving procurement the mandate to manage demand effectively. For example, in shopfitting, a critical touchpoint for customers, we ensure specifications support brand identity while delivering cost savings.  

 

By enhancing transparency and negotiating more favorable contracts, we help brands reduce unnecessary expenses while maintaining consistency and quality across all indirect procurement areas. 

Icon - Case Study: Achieving 10% Cost Reduction Through Indirect Spend Optimization

For a leading European department store chain, we centralized procurement processes across 35 initiatives in indirect categories. Our work delivered a 10% reduction in indirect spend, translating into €20 million in savings. 

 

Here’s how we achieved it: 

 

  • Transparency: We implemented a clear spend tracking system, focusing on expenses exceeding €50k to ensure tighter cost control. 
  • Demand Management: Collaborated with key stakeholders to align spending with strategic objectives, avoiding unnecessary or duplicative purchases. 
  • Optimization: Tailored shopfitting specifications and service levels to support the brand’s premium identity while identifying cost-saving opportunities in materials and processes. 

 

This hands-on, collaborative approach not only reduced costs but also preserved the quality and customer experience. 

Private labels are essential for boosting margins and fostering customer loyalty, but managing them effectively demands a delicate balance between cost efficiency and quality. We tackle this challenge by standardizing product specifications, strengthening supplier relationships, and optimizing sourcing processes. Leveraging tools like online auctions ensures we secure the best value while maintaining the highest standards. 

 

To further enhance cost-effectiveness and supply chain resilience, we leverage our office in Shanghai to support Far East sourcing where appropriate. This local presence enables us to work closely with suppliers, ensuring compliance with quality requirements and delivering competitive pricing. 

 

This structured approach ensures private-label products consistently meet customer expectations, drive profitability, and position brands for long-term success in a competitive marketplace. 

Icon - Case Study: Boosting Margins by 7.6% Through Private Label Optimization

For a leading European food retailer, we implemented a structured approach to maximize Private Label potential by balancing cost efficiency with quality standards. This included streamlining supplier negotiations, conducting cost breakdowns, and standardizing product specifications.

 

Key initiatives included qualifying new suppliers, leveraging data-driven tendering processes, and conducting workshops to optimize top SKUs. These efforts led to a 7.6% improvement in margins, strengthened supplier partnerships, and ensured high product quality.

 

This comprehensive strategy positioned the client’s Private Label products for long-term profitability and competitiveness in a dynamic market.

Strong brand negotiations are essential for securing better terms and strengthening supplier partnerships, but achieving success requires thorough preparation and strategic execution. We equip Category Management teams with a proven toolkit that includes analysis of the category dynamics and individual supplier performance, clear margin optimization techniques, and tailored negotiation strategies.

 

By providing targeted training and on-the-job support, we ensure teams are confident and well-prepared to achieve the best possible outcomes. This approach not only improves immediate results but also builds internal capabilities for lasting value creation.

Icon - Case Study: Driving 2.3% Margin Growth Through Strategic Negotiations

For a major retail department store group in Europe, we transformed their brand negotiation processes to improve transparency, efficiency, and outcomes. By introducing a client-specific toolkit, including a contribution margin calculation tool, supplier benchmarking, and negotiation guidelines, we enabled the client to negotiate effectively with their top supply partners.

 

This structured approach resulted in a 2.3% improvement in contribution margins, equivalent to €3.6 million annually. Alongside immediate results, we equipped the procurement team with enhanced analytical tools and a strategic framework for sustained success in future negotiations.

 

PROCUREMENT: LET’S GET REAL!

Our Experts on Brand Negotiation


 

Success Stories in Retail Management 

Delve into our diverse collection of retail procurement case studies, showcasing strategic approaches and practical solutions tailored to industry challenges.

Client Case Global transformation of the supply chain function in franchis... Global transformation of the supply chain function in franchis...

Client Case Category Management - product range optimization in food retail Category Management - product range optimization in food retail

 

DISCOVER MORE

 

Strategic insights & tools

Magazine Develop creative strategies to achieve NEGOTIATION Excellence Develop creative strategies to achieve NEGOTIATION Excellence

Article Demand Management & Tail-end Management Demand Management & Tail-end Management

Magazine NEARSHORING – Reshaping Supply Chains NEARSHORING – Reshaping Supply Chains